Preparing for your retirement is an important way to help ensure your financial future. However, with the markets becoming increasingly volatile in recent years, many Americans have been looking into building not only wealth but also wealth protection. The 2020 economic crisis continues to have a significant impact on the financial sector and world markets. While millions of Americans rely on popular plans such as the 401(k), traditional IRA, and Roth IRA, their nest eggs could be at risk over the long run.
Fortunately, there is an option that can broaden your retirement assets beyond traditional paper-based ones and provide additional diversification benefits. Purchasing precious metals and establishing a self-directed IRA could be the answer. Protecting your retirement if you find yourself in the “risk zone” could benefit you by backing your portfolio with precious metals. With that in mind and with information from U.S. Money Reserve, we discuss how you can do just that.
The Retirement “Risk Zone”
In 2017, a study reported by the American College of Financial Services gave an overview of the retirement “risk zone.” The study identifies this zone as the final 10 years of a person’s working life and the first 10 years of retirement. During this 20-year period, nest-egg balances are often at their highest. However, it is also the period when retirement dollars are at their most vulnerable. That risk is only heightened by the prospect of an economic shock or an unpredictable financial downturn.
“When the shock occurred at year 20 of the 40-year savings period, terminal wealth at the time of retirement decreased by 16 percent. However, when the shock occurred at the point of retirement (year 40 of the savings phase), the retiree’s terminal wealth decreased by 24 percent,” states the study.
“That’s because in the retirement risk zone, clients are much more likely to be starting to withdraw from, rather than pay into, their saved assets…. There’s no more time for an [asset] to recover when things go bad if you’re already focused on cashing in on that asset, either because you want to or because you need to,” the authors explain as part of a 2020 follow-up note to the original study.
The study concluded that retirement holders could build up a large nest egg and then see it decrease because of an unexpected dip in the market. That means many people across the country could be at financial risk, even when they believe they have taken all of the right steps to protect their money. Protecting yourself from unexpected market downturns is a must when it comes to your retirement.
“Based on the history of previous U.S. market crashes, [portfolio owners] who are currently entirely in stocks could lose as much as 80 percent of their savings if the 1929 or 2001 crash repeats,” warned Ron Surz in a 2018 Nasdaq.com article.
The older generations are in control of the majority of the country’s wealth. However, as a result of the recent market volatility, those finances could be at serious risk. This year, Surz wrote about those in the risk zone and how the current market may affect their retirement savings: “Most [individuals] in the risk zone spanning the 5–10 years before and after retirement are taking more risk than they can afford,” Surz said, while also stating that IRAs are at risk.
“The coronavirus-induced market crash is an eye-opener that should not be ignored. The worst is not yet over, and there will be other market crashes in this decade, even after this disaster is behind us. The critical…lesson of the coronavirus is that prudence can and has defended in this current crash,” he continued.
As it stands, it is unclear how hard the average retirement account could be hit or how long it could take to recover. For that reason, taking sensible steps to protect your finances has never been more important. Many individuals who are nearing retirement age simply cannot afford to take on large financial risks. The sooner you take action, the better opportunity you have to help protect your nest egg.
Self-Directed IRAs and Precious Metals
While you may be familiar with traditional retirement plans, a self-directed IRA is slightly different. Typical plans tend to be limited to certain types of assets, such as stocks and bonds. However, self-directed IRAs can accommodate other assets, such as real estate, private notes, businesses, and precious metals. Choosing this type of plan means that you can diversify your retirement dollars and help protect your savings from the volatility of the financial markets. This allows you to have more freedom and flexibility when it comes to planning for your future.
Purchasing precious metals could be one of the best forms of risk zone protection. Transferring a portion of your money into physical gold or other precious metals could help protect you from financial risk and help build a safer retirement plan.
Throughout history, gold has acted as a hedge against inflation, deflation, economic uncertainty, market volatility, and other forms of financial hardship. Should you currently be holding paper assets, making the move to transfer a portion of your savings to a self-directed IRA could be a strong choice. Because of the level of uncertainty in the market from the current crisis, it could be the right time to diversify with precious metals.
Ignoring the potential warning signs of the economy could result in further financial instability. Leading up to the global financial crisis of 2007–2008, many 30- to 50-year-olds who held traditional IRAs were significantly impacted. After the massive crash happened, those who had traditional assets recorded an average loss of 30 percent. Additionally, half of IRA and 401(k) holders over the age of 60 lost more than 20 percent.
Establishing a Self-Directed Precious Metals IRA could help protect your retirement. You may wish to open a new account entirely or transfer a portion of your existing self-directed IRA into precious metals. Whatever path you choose to follow, U.S. Money Reserve can help you every step of the way.
About U.S. Money Reserve
U.S. Money Reserve is a leading gold company known for its excellent customer service. The company’s Account Executives are on hand to help customers reach their long-term goals by diversifying with precious metals.
Under the expertise of President Philip N. Diehl, who was formerly the 35th director of the U.S. Mint, the company has a proven track record of trusted practices that have customers’ best interests in mind. U.S. Money Reserve holds an A+ rating from the Better Business Bureau and an AAA rating from the Business Consumer Alliance.
As one of the largest distributors of government-issued precious metals in the country, U.S. Money Reserve can help customers looking for a secure and convenient method for transferring a portion of their savings into precious metals. The company’s IRA program combines the traditional protection of precious metals with the tax benefits and modern convenience of an IRA.
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